The 8 Ways Urban Demographics are Changing
Cities are what keep the global economic machine humming.
Over 80% of the world’s economic output is derived from activities in cities – and more specifically, it’s estimated that 60% of GDP growth occurs in just the top 600 urban centers.
Given the above, it’s fair to say that the destiny of humankind is directly linked to what happens in major cities. Further, how urbanization plays out over time could end up having a significant ripple effect on the economy, and we should pay close attention to such trends.
Today’s infographic comes to us from Raconteur, and it showcases eight different ways that urban demographics are evolving.
Below we will summarize the changes, along with potential impacts on the economy:
1. A Higher Percentage of Urban Dwellers
Between 1950 and 2018, we went from 30% to 55% of the world’s population living in cities. This has been driven largely by today’s middle and high income economies in places like North America, South America, Europe, and Japan.
The next stage of urbanization will see us move to 68% – more than two-thirds of the world’s population – living in these urban conglomerations. It will be driven by countries in developing markets, creating a potent investing megatrend along the way.
2. The Countries Driving Growth
It’s estimated that three countries will combine for 35% of all urban population growth.
|Rank||Country||Growth in Urban Population (2018-2050)||% of Global Urban Growth|
|#1||India||416 million people||17%|
|#2||China||255 million people||10%|
|#3||Nigeria||189 million people||8%|
|World||860 million people||35%|
In total, there will be 2.5 billion more urban dwellers in 2050 than there are today. Many of these people will experience rising incomes in cities, increasing the global middle class to an unprecedented size.
3. Peaking Rural Populations
On the flipside, it appears the world’s rural population has nearly flatlined, with anticipation that it will peak in absolute terms in the next couple of years. Rural populations have been slowly growing since 1950 until this point.
4. The Rise of Megacities
There will be 43 megacities by the year 2050, which is more than quadruple the amount that existed back in 1950.
The changing geography of the world’s megacities will be one of the major forces that shapes the future of the global economy and accompanying investment trends.
5. New Population Centers
By 2050, more than 70% of the world’s urban population will live in Asia or Africa. Meanwhile, North America and Europe will combine for closer to 15% of that total.
The role of de-urbanization is often downplayed or forgot about when discussing urban demographics, but it is an interesting issue.
Factors such as falling fertility rates, economic contraction, and natural disasters are actually shrinking the size of some cities. In fact, McKinsey predicts that 17% of cities in developed regions will see a drop in population between 2015-2025.
7. Disparities in Urban Growth
The rate for urban population growth is actually trending down across all types of economies – however, these rates come from very different starting points.
High income countries are currently averaging growth of less than 1% per year, and this will continue to decline to below 0.5% per year by 2050. Over the same time period, low income nations will go from 4% to 3% per year.
8. Changes in Average Age
The age distributions in large cities within developed nations will begin to skew older, something we’ve shown previously when looking at the median age of every continent.
The biggest impact here may be felt on dependency ratios in the workforce. With a smaller pipeline of new workforce entrants and a burgeoning population of seniors, this changing ratio is one of the most significant stories impacting urban demographics.
How Total Spend by U.S. Advertisers Has Changed, Over 20 Years
This graphic visualizes the fluctuations in advertising spend in the U.S., along with its brutal decline of 13% as a result of COVID-19.
Total Spend by U.S. Advertisers, Over 20 Years
With an advertising economy worth $239 billion in 2019, it’s safe to say that the U.S. is home to some of the biggest advertising spenders on the planet.
However, the COVID-19 pandemic has resulted in the major upheaval of advertising spend, and it is unlikely to recover for some time.
The graphic above uses data from Ad Age’s Leading National Advertisers 2020 which measures U.S. advertising spend each year, and ranks 100 national advertisers by their total spend in 2019.
Let’s take a look at the brands with the biggest budgets.
2019’s Biggest Advertising Spenders
Much of the top 10 biggest advertising spenders are in the telecommunications industry, but it is retail giant Amazon that tops the list with an advertising spend of almost $7 billion.
In fact, Amazon spent an eye-watering $21,000 per minute on advertising and promotion in 2019, making them undeniably the largest advertising spender in America.
Explore the 100 biggest advertisers in 2019 below:
|Rank||Company||Total U.S. Ad Spend 2019||Industry|
|#4||Procter & Gamble||$4.3B||Consumer Goods|
|#9||American Express||$3.0B||Financial Services|
|#11||JPMorgan Chase||$2.8B||Financial Services|
|#16||Nestlé||$2.3B||Food & Beverages|
|#18||Expedia Group||$2.2B||Travel & Hospitality|
|#19||Capital One Financial||$2.2B||Financial Services|
|#20||Fiat Chrysler Automobiles||$2.0B||Automotive|
|#24||PepsiCo||$1.7B||Food & Beverages|
|#25||Bank of America||$1.7B||Financial Services|
|#28||McDonald’s||$1.6B||Food & Beverages|
|#29||Booking Holdings||$1.6B||Travel & Hospitality|
|#31||Johnson & Johnson||$1.5B||Pharmaceuticals|
|#32||Anheuser-Busch InBev||$1.5B||Food & Beverages|
|#34||Merck & Co.||$1.5B||Logistics|
|#44||Wells Fargo||$1.1B||Financial Services|
|#45||Yum Brands||$1.1B||Food & Beverages|
|#51||Diageo||$918M||Food & Beverages|
|#53||Discover Financial Services||$883M||Financial Services|
|#54||Mars||$880M||Food & Beverages|
|#58||Molson Coors||$822M||Food & Beverages|
|#61||Coca-Cola||$816M||Food & Beverages|
|#64||Kraft Heinz||$782M||Food & Beverages|
|#70||Constellation Brands||$749M||Food & Beverages|
|#80||Marriott International||$667M||Travel & Hospitality|
|#89||Reckitt Benckiser||$593M||Consumer Goods|
|#90||Keurig Dr Pepper||$593M||Food & Beverages|
|#91||Restaurant Brands International||$589M||Food & Beverages|
|#92||Inspire Brands||$589M||Food & Beverages|
The report offers several ways of looking at this data—for example, when looking at highest spend by medium, Procter & Gamble comes out on top for traditional media spend like broadcast and cable TV.
On the digital front, Expedia Group is the biggest spender on desktop search, while Amazon tops the list for internet display ads.
The Rise and Fall of Advertising Spend
Interestingly, changes in advertising spend tend to fall closely in step with broader economic growth. In fact, for every 1% increase in U.S. GDP, there is a 4.4% rise of advertising that occurs in tandem.
The same phenomenon can be seen among the biggest advertising spenders in the country. Since 2000, spend has seen both promising growth, and drastic declines. Unsurprisingly, the Great Recession resulted in the largest drop in spend ever recorded, and now it looks as though history may be repeating itself.
Total advertising spend in the U.S. is estimated this year to see a brutal decline of almost 13% and is unlikely to return to previous levels for a number of years.
The COVID-19 Gut Punch
To say that the global COVID-19 pandemic has impacted consumer behavior would be an understatement, and perhaps the most notable change is how they now consume content.
With more people staying safe indoors, there is less need for traditional media formats such as out-of-home advertising. As a result, online media is taking its place, as an increase in spend for this format shows.
But despite marketers trying to optimize their media strategy or stripping back their budget entirely, many governments across the world are ramping up their spend on advertising to promote public health messages—or in the case of the U.S., to canvass.
The Saving Grace?
Even though advertising spend is expected to nosedive by almost 13% in 2020, this figure excludes political advertising. When taking that into account, the decline becomes a slightly more manageable 7.6%
Moreover, according to industry research firm Kantar, advertising spend for the 2020 U.S. election is estimated to reach $7 billion—the same as Amazon’s 2019 spend—making it the most expensive election of all time.
Can political advertising be the key to the advertising industry bouncing back again?
Visualized: A Breakdown of Amazon’s Revenue Model
Here’s a look at the different parts of Amazon’s revenue model, and how much money each business segment makes.
Visualized: A Breakdown of Amazon’s Revenue Model
Amazon has evolved into more than just an online store. While ecommerce makes up a significant portion of the company’s overall sales, its diverse revenue model generates billions through various business segments.
This visualization provides an overview of the different parts that make up Amazon, showing each business unit’s net sales from June 2019 to 2020.
A Diverse Revenue Model
With a market cap of $1.7 trillion, Amazon is currently the most valuable retailer in the world. The company is expected to account for 4.6% of total U.S. retail sales by the end of 2020—but the tech giant is more than just a one-trick pony.
A key factor in the company’s success is its diversification into other areas. Here’s a breakdown of Amazon’s revenue mix:
|Business Segment||Net Sales (June 2019 - 2020)|
|Online stores||$163 B|
|Third-party selling services||$63 B|
|Amazon Web Services||$40 B|
|Subscription services||$22 B|
|Physical stores||$17 B|
|Total Revenue||$322 billion|
While Amazon is truly more than an online store, it’s worth noting that online sales account for a significant amount of the company’s overall revenue mix. Over the period of June 2019 to 2020, product sales from Amazon’s website generated $163 billion, which is more than the company’s other business units combined.
A significant day for online sales is Prime Day, which has grown into a major shopping event comparable to Black Friday and Cyber Monday. In 2020, Prime Day is projected to generate almost $10 billion in global revenue.
While ecommerce makes up a large portion of Amazon’s overall sales, there are many other segments that each generate billions in revenue to create immense value for the tech giant. For instance, enabling third-party sellers on the platform is the company’s second-largest unit in terms of net sales, racking up $63 billion over the course of a year.
This segment has shown tremendous growth over the last two decades. In 2018, it accounted for 58% of gross merchandise sales on Amazon, compared to just 3% in 2000. While third-party sellers technically outsold Amazon itself, the company still makes money through commission and shipping fees.
Amazon is Not Alone: Diversification is Common
Amazon isn’t the only major tech company to benefit from diverse revenue streams.
Other tech giants generate revenue through a range of products, services, and applications—for instance, while a healthy portion of Apple’s revenue comes from iPhone sales, the company captures 17% of revenue from a mix of services, ranging from Apple Pay to Apple Music. Microsoft is another example of this, considering it owns a wide range of hardware, cloud services, and platforms.
While there are several reasons to build a diverse business portfolio, a key benefit that comes from diversification is having a buffer against market crashes. This has proven to be particularly important in 2020, given the economic devastation caused by the global pandemic.
The Sum of its Parts
Despite varying levels of sales, each business unit brings unique value to Amazon.
For instance, while Amazon Web Services (AWS) falls behind online sales and third-party sellers in net sales, it’s one of the most profitable segments of the company. In the fourth quarter of 2019, more than half of Amazon’s operating income came from AWS.
In short, when looking at the many segments of Amazon, one thing is clear—the company is truly the sum of its parts.
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